A person bought a refrigerator worth ₹22,800 with 12.5% interest compounded yearly. At the end of first year he paid ₹8,650 and at the end of second year ₹9,125. How much will he have to pay at the end of third year to clear the debt?
Answer & explanation
Answer: (d) ₹11,250
Add a year's interest (12.5%, one-eighth) to the balance and subtract each payment. The balance falls to ₹17,000 after year 1 and ₹10,000 after year 2, so year 3 needs ₹10,000 × 1.125 = ₹11,250.
- Year 1: 22,800 × 1.125 = 25,650; after paying 8,650 the balance is 17,000.
- Year 2: 17,000 × 1.125 = 19,125; after paying 9,125 the balance is 10,000.
- Year 3: 10,000 × 1.125 = 11,250 clears the debt.
- Check: ₹10,000 is only the balance at the start of year 3; it still earns a year's interest.
Remember · For instalments at compound interest, roll the balance forward: add the year's interest, subtract the payment. 12.5% is one-eighth.
Question and answer: UPSC's official GS Paper II (2018, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·